Professional Documents
Culture Documents
A pool of money
Managed by a professional investor
Manager works for an investment firm
Each fund has a specific objective
Over 6,000 funds to choose from
Figure 15.1
Three Reasons Why People
Purchase Mutual Funds
Diversification
funds of many investors are pooled and
used to purchase a variety of investments
Professional management
who is the fund’s manager?
managers can change
Convenience
phone
mail 16-3
Reasons for Investing Through Mutual
Funds
New/more types of funds
Few or no sales charges
Some performed better than common
stock
Widespread marketing
Selection is easier
Reasons for Investing Through Mutual
Funds
Current income
Long-term growth
Balanced
Classification of Mutual Funds
Common stock
Balanced
Bond
Specialty
Money market
Classification of Mutual Funds
COMMON STOCK:
Growth Sector
Value Global/international
Automatic reinvestment
Withdrawal plans
Deferred load
Redemption
12b-1
Disclosure of Fees
12b-1 fees
Management fee
charged yearly (.25 - 1%) based on a
percentage of the funds asset value
Contingent deferred sales load
charged upon withdrawal of funds (1-6%)
decreases with time held
12b-1 fees
fee to defray advertising and marketing
costs of the fund
Strategies for Selecting a Mutual
Fund
Match goals
Long-term/short-term performance
Size of fund
Fund performance in up/down markets